Aradhna Krishna, Richard Briesch, Donald R. Lehmann, and Hong Yuan

Pricing is one of the most crucial determinants of sales. Besides the actual price, how the price offering is presented to consumers also affects consumer evaluation of the product offering. Many studies focus on "price framing", how the offer price is communicated to the consumer, e.g., is the offered price given along with a reference price, is the reference price plausible, is a price deal communicated in dollar or percentage terms. Other studies focus on "situational effects", e.g., is it a national or a private label brand, is it in discount store or specialty store. In this article, an analysis of articles published in marketing examines the effects of deal characteristics, price frames and situations on consumer's perception of deal savings. This helps to determine the relative impact of the different promotional tools available to marketing managers.

One of our key findings is that deal characteristics and price frames – have the largest impact on consumers' perception of savings from a promotion, more than situational effects. Within deal characteristics, the two most impactful tools are the additional savings provided by bundling products together and the deal percentage. The clear implication is for managers to create bundles with large percentage savings. However, the number of items in the bundle moderates this effect. Thus, managers should create small bundles with large savings.

Within price frames, plausibility of the deal and the reference price have a significant large impact on perceived deal savings. We find that the presence of a regular price as an external reference price enhances the offer value of large plausible deal and implausible deals, but not of small plausible deals. Thus, high value deals should announce the regular price. Not surprisingly, we also find that a large deal amount more than compensates for its lower plausibility, so that deals of large magnitudes are evaluated more favorably than deals of smaller magnitudes, even when the brand is implausible. Thus, managers need not necessarily shy away from occasionally giving extremely large deal amounts.

With regard to store effects, we find that deals in discount stores are evaluated less favorably than those in department and specialty stores, probably due to their greater frequency. We also find additional support for the notion that there are price tiers among brands, i.e., deals on a national brand are perceived more favorably than those on generic and private brands, and the presence of a Manufacturer Suggested List Price increases the value of a deal on national brands more than on other brands. This suggests that when offering national brands on deals, managers should make external reference prices salient. Our findings, therefore, have many implications for the design of sales promotions.